Variable costing net income does not equal absorption costing net income due to ________.
A) variable selling costs
B) variable manufacturing overhead costs
C) fixed manufacturing overhead costs
D) variable and fixed manufacturing overhead costs

Question

Quizplus · Accepted Answer

The difference between variable costing net income and absorption costing net income is due to fixed manufacturing overhead costs. In variable costing, fixed manufacturing overhead costs are treated as period expenses and are not included in the cost of goods sold, while in absorption costing, fixed manufacturing overhead costs are included in the cost of goods sold. This leads to differences in net income under the two methods. Selling costs and variable manufacturing overhead costs are included in both methods, and therefore do not cause the difference in net income.

Variable Costing Net Income Does Not Equal Absorption Costing Net